San Francisco Has Highest Minimum Wage in Nation, But Thousands in City Make Less

by Aaron Tilley and Michael Stoll, San Francisco Public Press While San Francisco’s minimum wage is the highest in the nation, thousands of workers still earn below the current mandate of $10.55 an hour, say economists, anti-poverty activists and public officials.

When Lydia Panitig came from the Philippines, she said, her teaching credentials did not transfer, so her only option was a $25-a-day cleaning job. (Aaron Tilley/San Francisco Public Press)
When Lydia Panitig came from the Philippines, she said, her teaching credentials did not transfer, so her only option was a $25-a-day cleaning job. (Aaron Tilley/San Francisco Public Press)

It has been 10 years since voters passed the groundbreaking labor reform, and the city has built a first-of-its-kind inspection team that has recovered back wages for more than 3,000 workers.

But these efforts appear to have addressed only a fraction of the problem.

No local agency tracks minimum-wage jobs, so enforcement has relied on complaints from workers, who risk retaliation from employers by coming forward. But a recent study of other large cities suggest that San Francisco could have as many as 39,000 workers paid below the minimum. The 2008 Ford Foundation worker survey in New York, Chicago and Los Angeles found a 26 percent violation rate in a labor pool representing 15 percent of those cities’ populations.

Local studies bolster those estimates. The Chinese Progressive Association estimated in 2006 that 9,000 Chinese restaurant and garment workers in San Francisco were cheated out of the city’s base rate of pay.

As Congress begins to debate the national minimum wage this year, with President Obama’s proposal to increase it to $9 an hour taking center stage, San Francisco’s unfinished progressive labor reform could provide lessons for initiatives elsewhere to lift low-wage workers out of poverty.

The city’s experience suggests that they are likely to succeed only if existing laws are enforced, sending a message to both employers and workers that the minimum wage is not optional.

San Francisco labor inspectors say budget constraints limit them to investigating businesses only when their workers file claims. After years of partnering with community groups with deep roots in ethnic communities where the abuse is most widespread, the city is relying on the groups to produce educational workshops and provide the city with tips on violations, offering in exchange logistical support and funding.

“The majority of all minimum-wage violation cases that we handle involve the underground economy — workers who are paid in cash, employers who are not accurately tracking hours worked,” said Donna Levitt, director of the city’s Office of Labor Standards Enforcement, which in addition to the minimum wage enforces an array of other local labor rules.

State and federal labor agencies face similar challenges, labor experts say. The profusion of small businesses paying low wages in the modern economy makes it impractical to initiate probes into industries where wage theft is widespread.

“Even though a lot of community groups would like to see us do more targeted outreach and not be complaint driven, it would take some work to figure out how to do that effectively and efficiently,” Levitt said. “But I’d love to do that, to see how we’d do.”

Businesses across the city continue to skirt the law. As in other major cities across the country, they tend to concentrate in ethnic enclaves. In Chinatown alone, according to a 2010 survey by the Chinese Progressive Association, about half of the 433 surveyed restaurant workers received less than San Francisco’s legally mandated minimum wage, then $9.79 an hour.

A U.C. Berkeley political science graduate student, Els de Graauw, interviewed worker advocates in 2008. They told her some garment workers had such poor understanding of the law and “low expectations” of their earning potential that they sometimes settled for as little as $2 an hour.

Organizers in other communities report similar degrees of exploitation. The Filipino Community Center surveyed 50 caregivers for the elderly and disabled, finding that they made an average hourly rate of $5.33. The group recently started social gatherings twice a month to persuade underpaid workers to come forward. The work, organizers say, requires constant vigilance.

“When we first passed the minimum wage law,” said Shaw San Liu, a labor advocate with the Chinese Progressive Association, “it became apparent it’s meaningless if it can’t be enforced.”

Employers offer an array of excuses for why they pay below the minimum wage. Common ploys include deducting tips from a server’s paycheck (a practice banned throughout California), failing to pay overtime and making illegal deductions from salary for expenses like living quarters. Many are paid in cash, making violation claims hard to verify.

Forty-eight percent of complaints come from workers in the food-service sector — cooks, dishwashers, baristas and waiters.

Construction workers, hotel employees, security guards, home health aides and other service employees are also frequently illegally paid below the city’s base wage, which started in 2003 at $8.50 and is adjusted every year for inflation.

Now, San Francisco’s minimum is more than $2 higher than California’s. The city also provides for fewer exceptions.

But some workers say they fear that if they come forward they will be cast into long-term unemployment. Others fear deportation if federal agents are alerted to their immigration status.

For Levitt, of the city’s Office of Labor Standards Enforcement, building trust with workers is key. In each case, she said, a claimant “comes forward and tells us confidentially what the payment scheme is — from which we can build an investigation, and talk to other workers with some insider information about what’s going on, and let them know that they’re not the only ones.”

COMMUNITY PARTNERS

Three community groups, the Chinese Progressive Association, the Filipino Community Center and La Raza Centro Legal, get funding from the city for primary education and outreach in ethnic minority communities, extending the labor standards office’s ability to find aggrieved workers. The city doubled its investment in the groups since 2007, to $380,000 this year.

The vast majority of workers who show up to the Filipino Community Center’s outreach meetings are caretakers in group homes for disabled and elderly people. They are no strangers to being ripped off. They may not know the details of the minimum wage laws, said organizer Mario De Mira, “but many can just tell when they’re being broken. There’s a certain level of exploitation that happens to a lot of workers when they realize this isn’t right. It’s almost a moral thing.”

Earning the trust of workers is slow and painstaking work. Every other Wednesday evening, 15 to 20 laborers gather at the center’s offices in the largely working-class Excelsior neighborhood. Walls are lined with colorful motivational posters demanding worker justice. Traditional Filipino food is served. De Mira tries to determine which laws are being broken, and whether local labor officials should be tipped off.

Lydia Panitig worked for almost 30 years as a teacher in the Philippines. But when she moved to San Francisco in 2006, no school district would accept her professional experience. So she took a job that paid her not just below the San Francisco minimum wage, $8.82 at the time, but also well below the federal rate of $5.15. She received $25 a day as a cleaner and worked from midnight to 8 a.m. She said she never thought of going to labor officials to complain.

Eventually she found a better job. Now, at age 66, she is working for legal wages doing home care for 70 to 80 hours a month.

Still, Panitig and her husband barely cover the rent on their $900-a-month San Francisco apartment, plus other expenses. Lacking U.S. teaching credentials, she said she is stuck at the bottom of the wage scale.

“It’s the only choice I have,” Panitig said.

Even with more education about the minimum wage law, many workers are just grateful to have a job in the current labor market. And although undocumented immigrants qualify for the $10.55 local wage, they fear deportation if they report abuses, making identifying violations a challenge.

“San Francisco has taken great strides to pass strong laws, but wage theft is still rampant,” said Charlotte Noss, a project attorney at the Legal Aid Society-Employment Law Center, and co-chair of the city’s Wage Theft Task Force. “You still walk down a street in Chinatown and half of the workers you pass have experienced wage theft in the past week.”

PERENNIAL REFORMS

Former Supervisor Matt Gonzalez said the minimum wage law was cooked up over burritos late one night at Taqueria Cancún at 19th and Mission streets in 2001, when he and a few overworked legislative aides were debating ways to extend their pro-labor agenda to thousands of San Francisco’s low-wage workers.

“We started wondering what the guys behind the counter were being paid,” Gonzalez said. “The following day we started researching the creation of a local minimum wage and whether it was preempted by state law.”

The reformers answered that question resoundingly in 2003, when they teamed up with anti-poverty activists and the local Green Party to persuade 60 percent of voters to “vote yourself a raise.”

The Minimum Wage Ordinance briefly elevated Gonzalez to the status of standard bearer for San Francisco’s political left wing, culminating in a close but unsuccessful run for mayor against Gavin Newsom.

After leaving the Board of Supervisors, he briefly carved out a new role for himself in the ecosystem of worker protections through his private practice as a lawyer, taking on class-action lawsuits against big-time minimum wage violators. In 2007, he settled a lawsuit over wages with Marriott Hotel for $1.35 million and contributed back some of the proceeds to the Office of Labor Standards Enforcement for pursuing minimum wage claims. (Gonzalez now works for the Public Defender’s Office.)

While few cities have their own minimum wage laws, even fewer have local agencies devoted to enforcing them. Washington, D.C., and Santa Fe, N.M., rely on agencies whose focus is not labor regulation.

“Over the years, part of this work has been about learning together how to enforce labor laws,” said Liu of the Chinese Progressive Association. “There’s no one else to look to about how to run a city labor enforcement agency, because there are no others out there.”

San Francisco’s labor standards office has come a long way since its founding in 2001, when it was given the task of enforcing the city’s “prevailing wage,” an elevated pay rate for local government contractors.

Levitt has been there since the beginning. Formerly a carpenter and a union representative, she joined the agency as a prevailing-wage investigator and became director two years later.

The backers of the original Minimum Wage Ordinance have long pressed for more aggressive enforcement, and many have been frustrated by the city’s limited abilities to punish violators. Twice, in 2006 and 2011, they have enlisted politicians to strengthen the law and give the enforcement efforts more money and investigative authority.

The Wage Theft Prevention Ordinance, which the Board of Supervisors passed in 2011, amended the original law to:

  • Increase the budget of the labor standards office to $3 million.
  • Double punitive fines to $1,000 per worker for businesses that retaliate against employees filing claims.
  • Authorize inspectors to access payroll records, interview workers and inspect work sites during business hours.
  • Double the funding for collaboration with community organizations.

While it is too soon to tell whether these changes will appreciably increase collection of back wages from businesses, 2013 has been a good year so far. For the past three years, recovered wages have hovered between $707,000 and $831,000. But in just the first two months of this year, the city won back $813,000.

BUSINESS OPPOSITION

Activists’ calls for more intensive minimum wage enforcement have their skeptics. Business lobbying groups, such as the San Francisco Chamber of Commerce and the Golden Gate Restaurant Association, have consistently opposed the minimum wage and enforcement initiatives.

Both organizations came out against the 2003 minimum wage ballot initiative, describing it as a job killer. The restaurant association called it deceptive and labeled it a “lose-lose” plan.

Rob Black, the restaurant association’s executive director, is a well-connected political activist; his organization gave $10,000 last year to a political action committee controlled by Mayor Ed Lee.

(For his own part, the mayor has come out publicly in support of aggressive minimum wage law enforcement and signed the 2011 reform.)

Black said in an interview that restaurants and other small-business owners were burdened by myriad city, state and federal labor laws, and that there was no need to ramp up enforcement.

“We’re so far ahead of enforcement of everybody else — it seems strange that’s where you’d want to focus your energy,” Black said, referring to the San Francisco agency dedicated to labor law enforcement. “Why not be in Oakland or L.A., where city government isn’t staffed or engaged in enforcement?”

When Herrera, the city attorney, ran for mayor against Lee in 2011, he proposed doubling the number of minimum-wage enforcement agents, citing “a significant backlog of wage violation complaints.”

Herrera said in a recent interview that the city has “received real benefit for the money that it has invested” in minimum wage enforcement.

Levitt said a larger staff and more inspectors would be “wonderful,” but given the number of laws her office has to enforce, pushing more agents out into the field would not be an efficient use of resources. The office also oversees several labor laws other cities lack, including overtime pay, paid sick leave, universal health care and the prevailing wage.

The equivalent of 6.5 full-time employees are focused on minimum wage enforcement, so Levitt said the best use of their time is to concentrate on processing complaints. With a total staff of 17, she said, “I count my blessings. Of course, it doesn’t allow us to do proactive, targeted enforcement. But since we’ve never done that, I don’t know how valuable it would be.”

With improved education for employers, Levitt said, there is more awareness of the wage law, which reduces the number of offending businesses.

“We could certainly get more employers to track hours properly, to post minimum wage notices,” she said. “But to build cases that would win back wages is much more challenging, and those investigations take time and involve building trusting relationships with workers.”

WINNING BACK WAGES

In total, according to data from the Office of Labor Standards Enforcement, the city has recovered back wages in minimum wage cases for 3,079 workers, totaling $6.4 million, and has assessed $383,000 in additional fines on businesses.

Because the office is complaint-driven, a single case can affect just one worker, or as many as 170. The culprits included cozy neighborhood coffee shops, chic downtown hotels and restaurants, construction companies and security services.

Some high-profile companies have been assessed back wages. Michael Minna, the celebrity restaurateur’s namesake San Francisco eatery, was found to owe almost $40,000 to 35 workers. Other cases have ended in tiny settlements, as when Starbucks paid $115 — enough to buy one grande cappuccino a day for a month — to one worker.

But this February, the labor standards office scored one if its biggest victories. After a protracted battle with a bakery in Chinatown, it announced jointly with the City Attorney’s Office that it had won a record $525,000 in back wages and penalties from Dick Lee Pastry. The violations first surfaced in 2009, when organizers at the Chinese Progressive Association assembled a case against the business.

The Office of Labor Standards Enforcement was able to get seven workers to come forward. Workers were on the job for long hours, six days a week and being paid less than $4 an hour. Two workers, labor officials said, were even made to work in the employer’s home as maids after toiling long days at the restaurant.

“For the majority of workers it was their first job in the U.S.,” Levitt said. “They got it because they saw a ‘help wanted’ sign in the window.”

Herrera filed a lawsuit to ensure that the owners could not shut down the establishment to avoid paying the back wages.

For the workers, the settlement with Dick Lee Pastry was a long time coming. In many other cases, workers must delay their gratification. While half of all the labor office’s cases that were ultimately resolved in favor of workers were settled within three months, about 10 percent of cases have dragged on for more than two years.

With better funding, Levitt said, the office could improve investigation speed by updating its case-management database. “Now that the city’s budget looks better, I’ll be more comfortable asking for it,” she said.

Another problem that activists routinely cite: No local agency routinely tracks the number of workers who make (or are legally entitled to) the minimum wage. Labor advocates say that in order to set good policy, the city needs more accurate and up-to-date data on the size of the target population.

The best estimates come from academic and government sources. The San Francisco Controller’s Office relied on 2011 estimates from the federal Bureau of Labor Statistics in calculating that about 59,700 workers earned the San Francisco minimum wage of $9.92 or less in Marin, San Francisco and San Mateo counties. San Francisco makes up 45 percent of the population of those three counties. However, the federal data do not say how those minimum-wage workers are distributed among them.

Michael Reich, a researcher at the Institute for Labor and Employment at the University of California, Berkeley, estimates that as many as 55,000 people now “qualify” for the city’s wage of $10.55 — meaning they earn either the minimum or below.

Activists and local officials are still working on new reforms. Recently they reconvened in City Hall to devise additional strategies to combat “wage theft,” particularly affecting minimum-wage workers. That effort, under the banner of the Wage Theft Task Force, has just begun.

Liu said that initially advocates had scant resources to enforce the law. “So it’s always been a process of people on the ground trying to get these issues recognized by city leadership, and working to get laws and resources in place,” she said. “Protecting workers’ rights and labor standards has always been an uphill political battle.”

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